As the tragic war unfolds in Ukraine, investors are looking to their financial advisors for perspective. Veteran advisors understand that their job at times like this is to acknowledge the emotional turmoil that clients may be experiencing, but also to set aside emotion in addressing the potential impact on their investments. For this week’s Barron’s Advisor Big Q, we asked advisors: What are you telling clients about the impact of the war in Ukraine on markets and on their portfolios? 

Kevin Myeroff

Kevin Myeroff, principal, senior strategic director, Sequoia Financial Group: I did a video for my clients recently, and I started by saying that this is a human tragedy that’s taking place before us. I see that, and it obviously affects me—I’m the parent of an F-16 pilot who’s stationed in Germany. But then my job is to talk to you as your financial advisor, and I’ve got to take those feelings out of it to give you good advice. The only thing in my heart that I believe is that pulling all your money out and waiting for the right time to put it in is impossible to do. You’ve got to be right twice. 

Geopolitical events that cause market volatility are generally pretty short lived. And Russia and Ukraine have a small economic impact in the world. But volatility is caused by emotion. In any event like this, unintended consequences are a concern. The sanctions on Russia are so numerous, and from so many sources, that it’s hard to evaluate what the real economic impact on the world will be. What if everybody decides to stop buying [Russian] oil, and we see $6-a-gallon oil prices? 

Susan Kim

Photography by James Kang

Susan Kim, advisor, Ameriprise: The Russia and Ukraine crisis is likely to lead to short-term market volatility, based on history. For clients who are non-worriers, I touch very lightly on the Ukraine issue. They ask, “Do we need to worry about this?” And I say, “No, this too shall pass, don’t look at the statement for a few months and just enjoy your life.” Then I jump into their cash balance, upcoming expenses, and allocation. For more analytical clients, I show them two charts, one on how the S&P 500 performed around geopolitical events going back to 1941, and another on how capital markets and asset classes performed during times of war. 

At the end of the conversation I say that we have no control over this; the only thing we can do is to pray and maybe give monetary support. I actually send links to a few websites like the Red Cross Ukraine and Unicef, which I think are safe places for us to donate. I’m always asking every client, “Do you have peace in your life?” Often, it’s really hard to find because of all the uncertainty out there. So we talk about what they’re doing to find peace; I give them a few tips—I share that I meditate, I swim. My job is to help them find equilibrium. 

Peter Mallouk

Courtesy of Creative Planning

Peter Mallouk, president and CEO, Creative Planning: Ukraine by itself is not a big issue to the global economy. The bigger issue is the implications that come out of the situation. Higher energy prices could escalate dramatically from here. If we continue the intense pressure on Russia, it wouldn’t be surprising to see prices over $200 [per barrel]. And the implications for that become pretty serious, because you would see broader price hikes across commodities. 

I also think people are misattributing the U.S. market weakness solely to Ukraine and Russia. Really, we were coming off a very hot 2021. And there were concerns around what rising rates were going to mean for the markets and that we were overbought. That’s 80% what this correction is about. The other 20% is about what might unfold if this [conflict] doesn’t get contained pretty quickly. Either way, it’s a reminder for those who are in the spend-down phase not to look at everything in your portfolio as being about the best expected return over the long run. A lot of people left bonds entirely because the real returns were less than zero. One reason to own bonds is to have a place to go to meet your monthly income needs in the event of situations exactly like this. If you’re a very long-term investor, this will sort itself out. And then you should be thankful that the markets are down, and you should continue to invest in a diversified portfolio. 

Scott Tiras

Scott Tiras, president, Tiras Wealth Management: Looking at the historical data can be a helpful way to gain perspective on how “normal” these types of events and volatility are. There are great charts that show the intrayear market declines, and how even though we know most years end up in positive territory, historically the average decline is 14% each year.

The markets are down 8% to 15% depending on which index you want to look at, but diversified portfolios are down much less, and diversification will continue to be important. We have been here before, and will again, but we do not believe in market timing. If you sell equities when the market is down, you have to also know when to get back in and be right twice every time. 

For example, we know that those who sold stocks in March 2020 missed out on very good returns, as when the market recovers it often happens very quickly. We talked about this in great length in our communications when Covid hit. We know it can be unnerving, but I have sat in this chair for 34 years and there is always something to worry about. 

Aviva Pinto

Aviva Pinto, managing director, Wealthspire Advisors: Discussing markets during a period of war always seems kind of secondary. But the markets have been through many environments of uncertainty, from World War II to the Cuban Missile Crisis, the terror attacks on New York and Washington. And while none of those situations are identical to what’s going on with the Russian invasion right now, they do provide us with important parallels. Each of these moments in history shows us that the markets will be incredibly volatile in the days ahead. We will have to wait for some clarity about the economic ramifications, and that’s what’s going to guide what happens in the portfolios.

It’s obvious what’s going to happen in the short term— we’ve already seen prices of oil have been skyrocketing, and grain and corn futures are way up. It’s too early to know the long-term effects on the global economy. We tell our clients that the events taking place in Ukraine reinforce the importance of diversification and having balanced portfolios. We want to look at what’s causing the short-term market volatility, but we don’t want to overreact to it. We think that the U.S. economy is going to remain resilient. We tell clients that if they stay diversified and don’t try and time the market, they’re going to do well. In the past 20-plus years, 21 of the 25 worst trading days were followed within a month by one of the 25 best trading days.

Editor’s Note: These responses have been edited for length and clarity. 

Write to advisor.editors@barrons.com

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